Microsoft Studios executive Phil Harrison, a veteran who has been in the console biz for years, warns Valve about entering the hardware business with their new Steam Box "micro-consoles".

At CES 2013, Valve made headlines and sent a ripple through the gaming sphere with the announcement of its Steam Box "micro-consoles", confirming that Valve was now entering the hardware business.

Piston, one of Valve's prototypes that were demoed at CES 2013, featured multi-functionality and aims to bring Steam (the company's online gaming marketplace) conveniently to your living room.

With Piston and the other Steam Box prototypes Valve has now entered into the hardware business, putting itself against fierce competitors like Nintendo, Sony, and Microsoft who are veterans to the market.

This prompted Phil Harrison–a Microsoft Studios executive who has seasoned experience within the field–to issue a warning to both Valve and Xi3, the company behind the Piston prototype.

"Entering the hardware business is a really tough business," Harrison began. "You have to have great fortitude to be in the hardware business and you have to have deep pockets and a very strong balance sheet. It's not possible for every new hardware entrant to get to scale.

"They can be successful at small scale. But it's very rare for a new hardware entrant to get to scale, and I mean tens or hundreds of millions of units. There are a very small number of companies that can make that happen.

"And it's not just having a great brand or a great software experience. It's about having a supply chain and a distribution model and a manufacturing capacity and all the things that go with it. It's a non-trivial problem to solve and it takes thousands of people to make reality."

Given the prosperity and popularity of Valve's online gaming marketplace and community Steam, the company may be versatile enough to handle these points in terms of cost, given the revenue generated from digital gaming sales. However Valve started out making games like Half-Life, and do not have much experience in this field.

Harrison goes on to display his feelings on Valve as a whole:

"I admire Valve as a company and what they've achieved with Steam," Harrison continued when asked if Microsoft would be satisfied if, in two years' time, it had emulated the success of Steam with its own cloud gaming offering.

"So I wouldn't in any way criticise what they've achieved and the role they've played in the industry. But I'm not sure we would choose Steam as a benchmark of success. We would always seek to innovate and push beyond.

"Xbox Live as a foundation, the reach we have and the experience we deliver is a great place to build on."

Harrison also reveals his feelings on the Android-based Ouya as well as Valve's Steam Box, looking past the potential competition that these consoles may provide:

"Any new entrant, without being specific to any company or brand or product, to the games industry is ultimately a good thing, because it helps validate, grow and enhance consumer excitement and consumer interest in our category. So, ultimately, it's a win for everybody."

Phil Harrison does make a few very good points, and it will be interesting to see how Valve and Xi3's Piston as well as the other Steam Box prototypes develop over time….and how well they perform when introduced to the retail market.

Furthermore, it will be interesting to see if Valve responds to Harrison's warnings, and whether or not they'll take his words into consideration. As a veteran in the field, his words hold some weight, and hopefully Valve doesn't bite off more than it can chew with its new hardware.